Our retail research team has created 3 stock lists, namely Growth, Value and Yield.
|The Growth List comprises of small-mid capitalisation companies with business catalysts which will potentially grow their earnings in the near future. The Growth portfolio would be suitable for investors looking for higher returns and are willing to tolerate the risk of higher short-term volatility of stock prices.|
|The Value List focuses on companies which are undervalued based on their share prices as compared to the company fundamentals. It would be suitable for conservative investors who prefer price stability and have a longer investment horizon.|
|The Yield List comprises of stocks that provide consistent dividend pay-out. It would be suitable for investors whose primary focus is to gain regular dividend income from their investments.|
July Market Overview
The Singapore market dipped in the early part of July as investors were jolted by the escalating US-China trade war and surprise property cooling measures but recovered its ground after China backed down from retaliating against wider US tariff threats and EU moved to defuse trade tensions with US. The STI ended the month with a modest 1.6% gain.
Among STI component stocks, there was a noticeable shift in capital flows away from property developers (City Dev, UOL) and cyclical plays (Venture, SIA) into defensive counters (SPH, Singtel) and REITs (CCT, CMT). The index was also boosted by HK-based Jardine Matheson and Jardine Strategic after their 1H18 earnings beat expectations.
Ytd, the STI is down 2.4% (Jun: -3.9%) with a negative total return of -0.3% (Jun: -2.3%), inclusive of dividends. On an unweighted basis, the average loss of STI constituents was 5.2% (Jun: -6.9%), with 17 of 30 stocks still in the red.
Against this backdrop, Market Insight’s tech and property-laden Growth, Value, Yield (GVY) basket of stocks underperformed the broader market in July and slipped into a negative average ytd return of 1%, the first loss in three years.
Growth List +4.1% YTD
Average total return of the Growth portfolio was eroded by continued weakness in technology shares, Venture Corp, Valuetronics and AEM Holdings as they face softer sales guidance of key clients and potential tariff disruptions on global supply chains.
Even though its 2Q18 earnings met estimates, we exited AEM after the test handler flagged poorer sales visibility and possible headwinds going into 2019 as a key customer winds down its equipment upgrade cycle and delayed the launch of a new chip technology.
Rubber chemicals producer, China Sunsine remains the top performer, benefitting from short supply in the market as rivals were forced to suspend production after they failed to meet environmental standards.
APAC Realty took a nasty beating, dropping over 25% in a single day after the government imposed property curbs on Jul 5. The real estate agency has since clawed back half of its losses by virtue that the property market is still in the nascent stage of recovery and the cooling measures are unlikely to deter first-time buyers.
Value List -6.9% YTD
Following the property shock, we replaced local developers Bukit Sembawang and GuocoLand with CapitaLand, given its more diversified exposure, as well as ST Engineering, which offers both defensive qualities and long term growth potential.
Yield List -2.5% YTD
The Yield portfolio was weighed by rising interest rates following a second Fed rate hike in Jun, as well as the de-rating of UMS along with the tech selloff, and competitive pressures plaguing APTT. But based on its FY18 DPU guidance of 6.5¢, the Taiwan pay TV operator offers a market leading yield of 15.7%.
We added StarHub as we believe the market has overreacted to the the termination of its Discovery Network contract and impending entry of TPG Telecom. Current share price has also factored in an extreme scenario of zero pay TV contribution and further mobile revenue erosion. Even after taking a deep 60% cut in dividend payout to 10¢, the telco still offers a tempting yield of 5.8%.
Note: * Including dividends
** Priced in USD
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